Indigo Equipment Company sold 500 Rollomatics during 2017 at $6,440 each. During 2017, Indigo spent $34,587 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

a) Prepare 2017 entries for Crow using the expense warranty approach. Assume that Crow estimates the total cost of servicing the warranties will be $128,100 for 2 years.

b) Prepare 2017 entries for Crow assuming that the warranties are not an integral part of the sale. Assume that of the sales total, $154,400 relates to sales of warranty contracts. Crow estimates the total cost of servicing the warranties will be $128,100 for 2 years. Estimate revenues to be recognized on the basis of costs incurred and estimated costs.